Protecting you and your family when you get married
Planning to spend the rest of your life with someone is one of the most romantic decisions you can make. But failure to properly consider the financial implications of marriage can have dire consequences if the union breaks down, or worse, upon the death of a spouse. This is, of course, true at any age, but if you have children and are marrying later in life – perhaps for the second time around – the implications can be further complicated.
Yet there’s no need for such considerations to put a dampener on your romance. The good news is that there are a handful of very useful financial and legal tools at your disposal to make sure your affairs are in order to protect all of your loved ones if things take a turn for the worse.
If you want to protect any assets acquired through a previous marriage, you could consider having a pre-nuptial agreement drawn up. They’re not just for the rich and famous and are often used by individuals on more modest incomes, particularly among those wanting to protect an inheritance.
While it’s true that they’re not yet legally binding across the UK – although they are in Scotland – a court will take a pre-nuptial agreement into consideration when assessing the financial entitlement of both parties. It will do so as long as it’s not ‘manifestly unfair’ to either spouse and was entered into willingly. They’re not cheap to arrange but they can result in significant savings down the line.
Protecting your children upon death
The other tools at your disposal are designed to protect assets upon death. The first is a will.
As a parent, your will should make provision for the continuing care and financial support of any children under the age of 18, but if your children are grown up, then it only need focus on what you wish them to inherit.
If you die first and without a will, there’s a risk that your kids won’t receive a penny.
Marriage totally revokes a previous will. If you don’t get a new one, your estate will be divided according to the rules of intestacy when you die. Under the rules of intestacy in England and Wales, the spouse of the deceased keeps all the assets (including property), up to £250,000, and all the personal possessions, whatever their value. If the estate is worth more than £250,000, the remainder is then shared with the surviving spouse getting an absolute interest in half of the remainder, while the other half is then divided equally between the surviving children.
So if your married financial affairs are complex – perhaps a jointly owned property makes up most of your assets – making adequate provision for both your spouse and your children takes some serious planning.
One way to achieve these two aims is to use your will to create a life interest trust. They are flexible in that you can stipulate the terms you want while giving the surviving spouse a life interest in some or all of your estate. This means they’re able to stay in the home or receive an income from other assets but once they die or go into care, the assets can go to the kids.
Life insurance can also be a useful tool in estate planning. For example, a whole-of-life plan written in trust could be used. Not only would it provide a generous inheritance for your loved ones after your death, it can do so without incurring inheritance tax. The proceeds from the insurance policy are paid directly to the beneficiaries rather than to your estate and so are not accounted for when inheritance tax is calculated.
So while financial planning may not be quite as romantic as planning a wedding, the benefits it can yield for your loved ones if things take a turn for the worse far outweigh the disadvantage of a brief interruption to romance.
Jo Jackson, Head of Financial Planning at Brewin Dolphin in Newcastle, said, “Marriage can offer attractive tax breaks including transferable nil rate bands for inheritance tax purposes and capital gains tax free transfers between spouses. For those getting married later in life and born before April 1935, they can claim the married couple’s allowance.
“In addition to this, from April 2015, married couples who are not higher rate tax payers can transfer some of their income tax personal allowance and surviving spouses will be able to inherit their partner’s ISA funds.”
What to do next
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Any investment mentioned in this article is for illustrative purposes only and is not intended as investment advice. Any tax advantages mentioned are based on current legislation accurate at the date of print which is subject to change. The opinions expressed in this document are not the views held throughout Brewin Dolphin. No Director, representative or employee of Brewin Dolphin accepts liability for any direct or consequential loss arising from the use of this document or its contents
Brewin Dolphin is one of the leading providers of wealth management services in the UK and we have been helping clients make their money work harder through economic ups and downs since 1762.
In an age of widespread digital communications, we still believe that getting to know you personally and understanding your aspirations is the key to success. We tailor investment portfolios to your needs and provide a full range of financial planning services to create a meaningful strategy that will meet your financial and lifestyle goals.
With a large office in Newcastle, we have an expert team of investment specialists and financial planners who can help you to develop a sound strategy for managing your financial affairs and safeguarding your long-term wealth.
Deloitte is a leading professional services firm, with an office in Newcastle, which provides audit, consulting, financial advisory, risk management, tax and related services. Its diverse North East client base ranges from owner-managed businesses to multinational corporations.
Square One Law is an entrepreneurial, commercial law firm, based in Newcastle upon Tyne. The firm offers a wide range of legal services including: banking, commercial, commercial property, corporate, employment, litigation and private client. In 2014 Square One Law was awarded Insider Dealmaker’s “NE Corporate Law Firm of the Year”.